Investments in Biotech vs. Information Technology?

September 21st, 2011 by Jeremy E. Ellis Ph.D.

The information technology sector and the rapidly developing biotechnology and life sciences industries are generally heralded as the top two technology sectors ripe for investment. The information and computing technology sector is lead by a few stand-out companies: Google, FaceBook, Twitter, Skype, Groupon, Pandora, LinkedIn, Yelp, and Zynga. These companies have enjoyed incredible successes, but it is important to note that the vast majority of similar social media and web 2.0 start-ups failed.

Biotechnology and life sciences paint a very different investment outlook. While both industries are high risk and high return ventures, biotechnology is actually the safer of the two. In the 2000s fewer than 25% of information technology investments resulted in a gain. Whereas 42% of biotechnology companies produced positive profits for their financial backers. But this is just looking at the number or quantity of successful companies, we have not discussed the success of the respective ventures.

During the same time period more than 8% of life science / biotechnology investments returned over five times the amount invested, while only 4% of technology investments have achieved this level. Given this, it could be seen that biotech investment not only has a more probable return, but also has better odds of a higher return on investment. To be fair, these statistics don’t paint the full picture. There are outlier IT companies such as Google that have garnered massive returns for their investors, with over 100 times the return on investment. Life sciences and biotech generally max out in the 20x return range. According to the trends observed over the last decade the gains associated with information and computing technology companies were larger than those of the life sciences industry. Overall, however, the former represents a larger risk on the part of the investor with lower odds of making your money back, let alone turning a profit. In a simplistic analogy, investment in life sciences and biotechnology could be equated to a game of blackjack, while IT investment could be compared to winning the lottery.

It is important to note that the world is in a different position in 2011 than it was in the 1990s. During that period larger portions of biotechnology (12%) and information technologies (18%) companies experienced ROIs of greater than 5x or more (data compiled from Salehizadeh 2011). In summary, during the current era of fiscal responsibility investment in any high technology sector is fraught with risks that is not for the faint of heart, but for those that recognize increased probability of potential returns.

Does this apply to TransGenada? Quite simply, yes. As with any early phase company here is risk associated with investment in TransGenada; however, our success will rely on the expertise of our associates, the needs of the market, and the abilities of it’s managers to administer the company successfully. According to our preliminary market research we think that TransGenada has a high potential ROI due to the broad international appeal and market driven adoption, while essentially revolutionizing the industry.